China adopts new five-year economic plan with reforms crucial to its successComments
Twelve days of parliamentary pomp and ceremony have ended in China with the adoption of a new five-year plan for the economy.
It was agreed with a 92.7 percent vote – seen as a rubber stamping of the plan.
Concerns have been voiced about the health of China’s economy which expanded at its slowest pace in 25 years in 2015.
The Premier Li Keqiang stressed the importance of reforms in the plan to the country’s economic vitality.
“We are fully confident of China’s long term economic growth. The confidence is not from nowhere as we are confident that as long as we continue to reform and open up, China’s economy will not suffer a ‘hard landing’,” he said.
The 13th five-year plan aims to maintain growth at an average of between 6.5 and 7 percent a year by 2020.
GDP, meanwhile, will increase from 67.700 billion yuan – 9.360 billion euros last year to more than 92.700 billion yuan – almost 13 billion euros by 2020. That is more than double the 2010 GDP.
To make the figures stack up there will be reforms to state-owned enterprises, particularly in the steel and coal industries. They along with cement and chemical companies have suffered from strong over-capacity and lacklustre demand. But the PM said China has abundant resources and human potential to deal with this. There will be mergers and acquisition rather than closures.
Reports in recent weeks have suggested China could still make up to six million state workers redundant over the next few years. An aid package has already been approved aimed at relocating workers who lost their jobs as part of China’s supply-side reforms.
That is all within the strategy to move away from a manufacturing to services-based economy. Along with industry the real estate sector is also in decline resulting in lower prices and a slowdown in investment. The services sector, new technologies and domestic consumption are all set to be boosted notably through tax reductions or by facilitating access to credit.
The government is also looking to reform its financial markets. To reduce currency volatility and capital outflows, China is also planning to impose a tax that may curb excessive speculation.
For an insight into developments at the National People’s Congress Neil O’Reilly talked to Chinese affairs analyst Professor Kent Deng from the London School of Economics.
Neil O’Reilly euronews: “The main focus of this year’s Congress has been the economy and reform. Has anything emerged from the event that would suggest the leadership can turn around China’s slowing economy decline?”
Prof. Kent Deng: “In this round of these two congresses China’s leadership is considering to reduce the ‘supply side’ of Chinese production, meaning they will encourage some sort of domestic demand, so they encourage the demand side. This is a major re-balancing act in the Chinese economic planners’ book. We will see if this is going to be an achievable task. But from my knowledge and standing this requires enormous change; not only the economic structure but also the basic political philosophy of the ruling party.”
euronews: “Amid those economic problems there’ve been rumblings of discontent from ordinary Chinese people, with job losses and cut backs. Are there any signs of new political or democratic reforms coming from this Congress that would address that discontent?”
Prof. Kent Deng: “Very good question. Let’s not forget China is run by a Leninist party state. So they know this causality, they know this sort of general trend for a developing country that, after a decade or two of fast growth, democracy will appear. But this party will ensure that this kind of political development won’t happen. Therefore we don’t see any trend of democracy at any level in society emerging at this moment.”
euronews: “The gathering’s been closely watched by the international community. What are the positives and negatives that the West can draw from the congress?”
Prof. Kent Deng: “We can expect a certain degree of stability and continuity of party rule and also we can hope that the economy will still continue to grow at a speed of eight percent – the highest – or six percent the lowest in the next five years. The negative side is the enormous challenge for the central government to deliver what it has promised to its population for example: to correct the enormous distortion and the economic imbalance of the country. To encourage and facilitate the immense demand, to reduce over-production and to reduce for example capital flight. To reduce for example official corruption and all this requires enormous initiatives and also popular support. So I would still say this will be a very mixed bag in the next five years for the outside world.”